Back in the 90s my practice group was in an IPA, Independent Practice Association, a legal vehicle for contracting with health plans together without violating antitrust law by taking some financial risk. Ours took “global capitation,” meaning all of the risk, including reinsurance, much as if we were a health plan. That’s another story. We paid for everything, and discovered some things. Heart surgery cost almost the same at three different hospitals. It smelled of price-fixing (strictly illegal) although we had no evidence. The “sticker price” for a sinus operation was so high it provoked my surgeon to state, “I could re-vascularize your whole body for that!” Why so high for the ENT specialty? I don’t know, but the culture of each specialty is different, and somehow they had high sticker prices.
So what’s a sticker price? It’s THE price. However, every insurer from Medicare and Medicaid to the smallest commercial health insurer drove some discount from the sticker price. We charged a relatively small markup as our “sticker price” above what the best payer would pay on a schedule, in our fee for service practice. Sometimes, the sticker price is 400-500% of the highest payer. Or is it?
Hospitals for decades have been paid on DRGs: Diagnostic Related Groups. The game there is the DRG coding must include every diagnosis and complication for every patient to get the highest payment. That grew a whole industry of profit-seeking middlemen developing products and software solutions to maximize revenue. Hospitals also found a couple of outlier contracting entities. Small national health plans who pay a percent of billed charges, and also “outlier” patients, where a percent of billed charges could also be applied. Both of those led hospitals to crank up those billed charges, the “price,” or here the sticker price, to reap a percent. Higher the price, higher the payment.
But there’s a problem. First, this end: A patient of mine left Microsoft in the heady early days with a large bucket of money and decided to be “self-insured.” Basically, it means saving insurance premiums over time BECAUSE he could afford any loss, and in the long run mathematically should SAVE money that the insurer would have earned. Makes sense, actually, but wait! This is healthcare, where nothing makes sense! One ER visit, say, $5000 sticker price, normally discounted by insurance to, say, $2500, patient pays $150 and insurance pays the rest, so out of pocket is $150. For my wealthy patient, the bill came to…..$5000! Welcome to the land of the uninsured! Yes, folks, ONLY the wealthy uninsured AND the uninsured poor pay the full sticker price! How unfair is that? My wealthy patient soon bought a high deductible policy to get that insurer discount for healthcare, discovering to his pain that he, wealthy, couldn’t afford to go without insurance for healthcare! Well, neither can the uninsured.
My patient, D.R., (yes, I remember her well), had insurance via the State of Washington Basic Health Plan, designed for folks too poor to buy insurance and too well off for Medicare. She had a struggling business, and it improved, knocking her right off of that Basic Health Plan at the end of a month. Two weeks later she had appendicitis, an ER visit and admission, a 36-48 hour stay in the hospital and an $11,000 sticker price bill, a couple of decades ago. Today it would be MUCH more. The next month her parents subsidized an individual commercial insurance for her. It took a very long time to pay off the hospital. Today, medical bills like this are the leading cause of bankruptcy in America. This is widely known. Did you also know that 70% of the folks who file for bankruptcy were insured? Yup! Sticker prices out of network, balance billing, and high deductible plans. None of these are found among the top 35 or so advanced nations.
This nation is neglecting its citizens at a very high cost to…..its citizens! Those WITH insurance are using a system twice as expensive as the next most expensive country with outcomes that rank 13th of the top 13. Some states rank with the third world. More to say, more to come…..